Author
Home > Business > What is the Difference Between Bank Owned and Foreclosure?

Guilherme Mazui

•4 minutes to read

What is the Difference Between Bank Owned and Foreclosure?

🆚 Go to Comparative Table 🆚

The main difference between bank-owned and foreclosure properties lies in the manner in which they are sold and their condition.

Bank-owned properties:

  • Also known as Real Estate Owned (REO) properties.
  • Acquired by a financial institution when a homeowner defaults on their mortgage and the property is not sold during a foreclosure sale.
  • Generally have low interest rates and low down payments.
  • Sold through realtors at competitive prices, with the aim of the lender recovering most of their investment.
  • Have a clear title, as the bank usually clears any liens or encumbrances before listing the property for sale.
  • Can be found on the MLS, bank websites, and online REO listing services.

Foreclosure properties:

  • Sold during the foreclosure process through public auction.
  • If not sold at auction, the mortgage lender takes possession of the property and it becomes bank-owned.
  • Buying foreclosure properties can be risky, as they may have unpaid taxes or other liens on them.
  • Foreclosure properties are often vacant and may require repairs.
  • Listed for sale on the market, often marked as "REO," "bank-owned," and sometimes "foreclosure" or "foreclosed".

In summary, bank-owned properties are properties that have gone through the foreclosure process and are now owned by the bank, while foreclosure properties are still in the process of foreclosure and are sold at public auctions. Bank-owned properties are typically in better condition and have a clear title, making them more attractive to potential buyers.

On this page
  • What is the Difference Between Bank Owned and Foreclosure?
  • Comparative Table: Bank Owned vs Foreclosure

    • Comparative Table: Bank Owned vs Foreclosure

    The main difference between a bank-owned home and a foreclosed home lies in the process through which the bank acquires the property and the subsequent steps taken to sell the property. Here is a comparison table outlining the differences:

    Aspect Bank-Owned (REO) Properties Foreclosed Properties
    Process The bank repossesses the property after it has gone through the foreclosure process and not been sold at auction. The bank seizes the property through a legal procedure due to the homeowner's failure to pay their agreed-upon monthly mortgage payments.
    Sale Bank-owned homes are repossessed by the bank and put on the real estate market. Foreclosed homes are sold through public auction.
    Ownership The bank owns the property and has the right to sell it. The borrower can avoid foreclosure by repaying the amount owed up to the point of sale.
    Condition Bank-owned properties may be vacant, occupied by former owners or tenants, or even vandalized by upset owners. Foreclosed properties are usually evicted by the lender as part of the foreclosure process, but they may still be occupied by the former occupants.
    Buying Process Buyers often have to bid on properties without even a walkthrough, much less a professional inspection. Foreclosure proceedings are governed by laws that vary by state, and the lender must conform to specific rules throughout the process, including issuing notifications and providing options for the homeowner to bring the loan up to date.

    In summary, bank-owned properties are repossessed by the bank after the foreclosure process, while foreclosed properties are seized by the bank through a legal procedure. Bank-owned properties are put on the real estate market, while foreclosed properties are sold through public auction. The condition of the property and the buying process may also vary between the two types of properties.

    Read more:

    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.